YRC reaches deal to raise financing
12/23/2013 9:33 PM
12/23/2013 9:33 PM
YRC Worldwide Inc. on Monday announced an agreement with creditors to cut debt by about $300 million, a step toward winning union support for crucial contract givebacks.
Shares in the Overland Park-based trucking giant soared following the news. The stock closed up 22 percent, or $3.28, at $18.25.
“The agreement is a momentous step toward (restructuring) the company’s balance sheet, significantly improving the company’s credit profile, and is expected to secure some of the best-paying jobs” in the trucking industry, YRC chief executive officer James Welch said in a statement.
YRC, which has been negotiating to refinance almost $1 billion in debt, said some creditors and other investors agreed to buy $250 million of new shares at a price of $15 each.
In addition, bond owners will convert $50 million of their holdings to stock in a price range of $15 to $16.01, YRC said.
YRC’s 26,000 Teamsters-represented employees will vote by Jan. 8 on extending their contract into 2019, maintaining terms that reduced wages by 15 percent and giving the trucker new operating flexibility.
Creditors had sought the labor agreement before refinancing debt, while Teamsters leaders insisted on concessions from bondholders.
The company said the $300 million debt reduction “will meet a primary requirement” needed to satisfy the Teamsters.
Jamie Pierson, YRC’s chief financial officer, said interest payments may be cut by $30 million to $50 million, from about $150 million a year now, assuming the refinancing is completed at the end of January. He said talks with creditors are underway to win lower interest rates.
YRC piled up $1.4 billion in debt from acquisitions and what Welch has called “numerous missteps” before he took the job in 2011. The company staved off bankruptcy protection during the economic slowdown, with help from workforce concessions and creditors.
YRC has warned that steep cuts could come if its latest restructuring plan isn’t successful.